SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997.
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________.
COMMISSION FILE NUMBER 0-14703
NBT BANCORP INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 16-1268674
(State of Incorporation) (I.R.S. Employer Identification No.)
52 SOUTH BROAD STREET NORWICH, NEW YORK 13815
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (607)-337-6000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter periods that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
As of July 31, 1997, there were 9,002,467 shares outstanding, including 467,416
shares held in the treasury, of the Registrant's common stock, No Par, Stated
Value $1.00. There were no shares of the Registrant's preferred stock, No Par,
Stated Value $1.00, outstanding at that date.
An index to exhibits follows the signature page of this FORM 10-Q.
<PAGE>
NBT BANCORP INC.
FORM 10-Q -- Quarter Ended June 30, 1997
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets at June 30, 1997, December 31, 1996,
and June 30, 1996
Consolidated Statements of Income for the three month and six month
periods ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the six month periods
ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements at June 30, 1997
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on FORM 8-K
SIGNATURES
INDEX TO EXHIBITS
2
<PAGE>
<TABLE>
<CAPTION>
NBT BANCORP INC. AND SUBSIDIARY JUNE 30, December 31, June 30,
CONSOLIDATED BALANCE SHEETS 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------------
(dollars in thousands) (UNAUDITED) (See Notes) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 36,231 $ 35,790 $ 38,721
Federal funds sold - - 15,211
Loans available for sale 2,993 4,135 3,398
Securities available for sale, at fair value 437,277 369,202 364,971
Securities held to maturity (fair value-$31,241, $42,238
and $45,739) 31,243 42,239 45,744
Loans:
Commercial and agricultural 309,176 281,991 266,609
Real estate mortgage 125,059 119,870 120,168
Consumer 263,978 252,732 234,094
- -------------------------------------------------------------------------------------------------------------------
Total loans 698,213 654,593 620,871
Less allowance for loan losses 11,085 10,473 9,438
- -------------------------------------------------------------------------------------------------------------------
Net loans 687,128 644,120 611,433
Premises and equipment, net 17,138 16,307 16,491
Intangible assets, net 9,256 9,953 10,743
Other assets 17,217 17,240 17,931
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,238,483 $1,138,986 $1,124,643
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (noninterest bearing) $ 130,931 $ 122,115 $ 110,071
Savings, NOW, and money market 365,114 359,141 371,009
- -------------------------------------------------------------------------------------------------------------------
Time 445,160 435,063 394,330
- -------------------------------------------------------------------------------------------------------------------
Total deposits 941,205 916,319 875,410
Short-term borrowings 152,893 88,244 138,578
Other borrowings 20,189 20,195 3,008
Other liabilities 10,501 7,964 6,389
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 1,124,788 1,032,722 1,023,385
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value $1.00; shares authorized
-2,500,000 - - -
Common stock, no par, stated value $1.00; shares authorized
-12,500,000; issued 9,002,467, 8,838,437 and 8,864,430 9,003 8,838 8,442
Capital surplus 85,358 82,731 75,464
Retained earnings 29,126 24,208 27,623
Unrealized (loss) on securities available for sale,
net of income tax effect (1,598) (1,529) (3,728)
Common stock in treasury at cost, 473,076,
481,449, and 395,779 shares (8,194) (7,984) (6,543)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 113,695 106,264 101,258
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,238,483 $1,138,986 $1,124,643
- -------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
NBT BANCORP INC. AND SUBSIDIARY June 30, June 30,
CONSOLIDATED STATEMENTS OF INCOME 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data) (Unaudited)
<S> <C> <C> <C> <C>
Interest and fee income:
Loans and loans available for sale $15,944 $14,089 $31,142 $27,784
Securities - taxable 7,449 6,354 14,134 12,299
Securities - tax exempt 322 348 673 696
Other 44 24 93 39
- ------------------------------------------------------------------------------------------------------------------
Total interest and fee income 23,759 20,815 46,042 40,818
- ------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 8,752 7,816 17,145 15,766
Short-term borrowings 1,516 1,111 2,501 1,751
Other borrowings 291 80 572 160
- ------------------------------------------------------------------------------------------------------------------
Total interest expense 10,559 9,007 20,218 17,677
- ------------------------------------------------------------------------------------------------------------------
Net interest income 13,200 11,808 25,824 23,141
Provision for loan losses 1,000 700 1,715 1,300
- ------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 12,200 11,108 24,109 21,841
- ------------------------------------------------------------------------------------------------------------------
Noninterest income:
Trust income 687 655 1,373 1,309
Service charges on deposit accounts 933 799 1,837 1,574
Securities gains 1 219 18 1,011
Other income 650 394 1,063 757
- ------------------------------------------------------------------------------------------------------------------
Total noninterest income 2,271 2,067 4,291 4,651
- ------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 4,247 4,289 8,598 8,741
Net occupancy expense 654 624 1,308 1,298
Equipment expense 408 441 844 903
Amortization of intangible assets 359 395 737 790
Other operating expense 2,598 2,887 5,338 5,490
- ------------------------------------------------------------------------------------------------------------------
Total noninterest expense 8,266 8,636 16,825 17,222
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes 6,205 4,539 11,575 9,270
Income taxes 2,168 1,802 4,093 3,622
- ------------------------------------------------------------------------------------------------------------------
Net income $ 4,037 $ 2,737 $ 7,482 $ 5,648
- ------------------------------------------------------------------------------------------------------------------
Net income per common share $ 0.47 $ 0.32 $ 0.87 $ 0.66
Cash dividends per common share $ 0.150 $ 0.124 $ 0.300 $ 0.248
Average common shares outstanding 8,621,554 8,547,139 8,596,200 8,616,034
- ------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NBT BANCORP INC. AND SUBSIDIARY Six months ended June 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS 1997 1996
- ------------------------------------------------------------------------------------------------------
(dollars in thousands) (Unaudited)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 7,482 $ 5,648
Adjustments to reconcile net income to the cash provided by
operating activities:
Provision for loan losses 1,715 1,300
Depreciation and amortization of premises and equipment 709 764
Amortization of premiums and accretion of discounts on securities 354 6
Amortization of intangible assets 737 790
Proceeds from sales of loans originated for sale 2,881 3,248
Loans originated for sale (1,738) (2,332)
Realized gains on sales of securities (18) (1,011)
(Increase) decrease in interest receivable (274) 440
Increase (decrease) in interest payable 755 (124)
Other, net 2,323 2,142
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 14,926 10,871
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from maturities 19,232 20,352
Proceeds from sales 45,969 98,599
Purchases (133,746) (101,480)
Securities held to maturity:
Proceeds from maturities 18,741 13,322
Purchases (7,745) (18,755)
Net increase in loans (44,723) (31,693)
Purchase of premises and equipment, net (1,540) (788)
Sale of branch, net (219) -
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (104,031) (20,443)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net increase in deposits 24,886 2,378
Net increase in short-term borrowings 64,649 22,633
Repayments of other borrowings (6) (4)
Common stock issued, including treasury shares reissued 5,150 1,230
Purchase of treasury stock (2,569) (4,987)
Cash dividends and payment for fractional shares (2,564) (2,125)
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 89,546 19,125
- ------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 441 9,553
Cash and cash equivalents at beginning of year 35,790 44,379
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 36,231 $ 53,932
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the
period for:
Interest $ 19,463 $ 17,801
Income taxes 1,146 2,872
Noncash investing activity:
Transfer of loans available for sale to loans held to maturity - 1,775
- ------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
NBT BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of NBT Bancorp Inc. (the Registrant) and its wholly-owned subsidiary,
NBT Bank, N.A. (Bank). All intercompany transactions have been eliminated in
consolidation. Certain amounts previously reported in the financial statements
have been reclassified to conform with the current presentation.
The determination of the allowance for loan losses is a material estimate
that is particularly susceptible to significant change in the near term. In
connection with the determination of the allowance for loan losses management
obtains independent appraisals for significant properties.
Net income per common share is computed based on the weighted average
number of common shares and common share equivalents outstanding during each
period after giving retroactive effect to stock dividends. Cash dividends per
common share are computed based on declared rates adjusted retroactively for
stock dividends.
The balance sheet at December 31, 1996 has been derived from audited
financial statements at that date. The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to FORM 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month and six month periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant's annual report on FORM 10-K
for the year ended December 31, 1996.
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 (SFAS No. 128) Earnings Per Share effective for periods ending after
December 15, 1997. SFAS No. 128 was issued to simplify the computation of
Earnings Per Share (EPS) and to make the U.S. standard more compatible with
international standards. Prior period EPS will be restated after the effective
date of this statement. The adoption of SFAS No. 128 should have no significant
effect on earnings per share as the Company does not have a complex capital
structure.
In February 1997, the FASB issued SFAS No. 129 Disclosure of Information
about Capital Structure. SFAS No. 129 consolidates existing disclosure
requirements and eliminates the exemption of nonpublic entities from certain
capital disclosure requirements. The new Statement contains no change in
disclosure requirements for companies that were subject to the previously
existing requirements. The adoption of SFAS No. 129 should not have a material
impact on the Company's financial condition or results of operations.
In June 1997, the FASB issued SFAS No. 130 Reporting Comprehensive Income.
SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from nonowner sources. The impact of adopting SFAS No. 130, which
is effective for periods beginning after December 15, 1997, has not been
determined.
In June 1997, the FASB issued SFAS No. 131 Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 requires public business
enterprises to report financial and other information about key
revenue-producing segments of the entity for which such information is available
and is utilized by the chief operating decision maker. Specific information to
be reported for individual segments includes profit or loss, certain revenue and
expense items and total assets. A reconciliation of segment financial
information to amounts reported in the financial statements would be provided.
SFAS No. 131 is effective for periods beginning after December 15, 1997 and the
impact of its adoption has not been determined.
6
<PAGE>
COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, various commitments and contingent liabilities
arise, including commitments to extend credit and standby letters of credit.
Also, off-balance sheet financial instruments such as interest rate swaps,
forward contracts, futures, options on financial futures, and interest rate
caps, collars and floors bear risk based on financial market conditions. The
following table summarizes the Registrant's exposure to these off-balance sheet
commitments and contingent liabilities as of June 30, 1997:
Contractual or
Notional Value
at June 30, 1997
Financial instruments with off-balance sheet credit risk:
Commitments to extend credit $115,926,000
Standby letters of credit 1,708,000
Financial instruments with off-balance sheet market risk None
7
<PAGE>
NBT BANCORP INC. AND SUBSIDIARY
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to provide the reader with a
concise description of the financial condition and results of operations of NBT
Bancorp Inc. (Bancorp) and its wholly owned subsidiary, NBT Bank, N.A. (Bank)
collectively referred to herein as the Company. This discussion will focus on
Results of Operations, Financial Position, Capital Resources and Asset/Liability
Management. Reference should be made to the Company's consolidated financial
statements and footnotes thereto included in this FORM 10-Q as well as to the
Company's 1996 FORM 10-K for an understanding of the following discussion and
analysis. The Company has a long history of distributing stock dividends; in
December 1996, a 5% stock dividend was distributed for the thirty-seventh
consecutive year. Throughout this discussion and analysis, amounts per common
share have been adjusted retroactively for stock dividends and splits for
purposes of comparability.
OVERVIEW
Record net income of $4.0 million ($0.47 per share) was realized in the second
quarter of 1997, representing a 47.5% increase from second quarter 1996 net
income of $2.7 million ($0.32 per share). The major contributing factor for the
increase in net income was increased net interest income. The increase in net
interest income was a result of an increase in average earning assets, as loan
and securities portfolios continue to expand. Also contributing to the increase
in net income was an increase in noninterest income and a decline in noninterest
expense.
Net income of $7.5 million ($0.87 per share) was realized for the six month
period ended June 30, 1997, a 32.5% increase from the first six months in 1996
net income of $5.6 million ($0.66 per share). The increased profitability for
the six months ended June 30, 1997 was driven by factors similar to those of
second quarter 1997.
Table 1 depicts several measurements of performance on an annualized basis.
Returns on average assets and equity measure how effectively an entity utilizes
its total resources and capital, respectively. Both the return on average assets
and the return on average equity ratios increased for the quarter and six month
periods ended June 30, 1997 compared to the same periods a year previous.
Net interest margin, net federal taxable equivalent (FTE) interest income
divided by average interest-earning assets, is a measure of an entity's ability
to utilize its earning assets in relation to the interest cost of funding.
Taxable equivalency adjusts income by increasing tax exempt income to a level
that is comparable to taxable income before taxes are applied.
<TABLE>
<CAPTION>
TABLE 1
PERFORMANCE MEASUREMENTS
- ---------------------------------------------------------------------------------------------------
First SECOND SIX Third Fourth Twelve
Quarter QUARTER MONTHS Quarter Quarter Months
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997
Return on average assets 1.19% 1.33% 1.26%
Return on average common equity 12.82% 14.78% 13.81%
Net interest margin 4.71% 4.65% 4.68%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1996
Return on average assets 1.09% 0.99% 1.04% 1.18% 1.12% 1.10%
Return on average common equity 10.94% 10.90% 10.92% 13.28% 12.11% 11.80%
Net interest margin 4.66% 4.64% 4.65% 4.70% 4.77% 4.69%
- ---------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
NET INTEREST INCOME
Net interest income is the difference between interest income on earning assets,
primarily loans and securities, and interest expense on interest bearing
liabilities, primarily deposits and borrowings. Net interest income is affected
by the interest rate spread, the difference between the yield on earning assets
and cost of interest bearing liabilities, as well as the volumes of such assets
and liabilities. Table 2 represents an analysis of net interest income on a
federal taxable equivalent basis.
Net federal taxable equivalent (FTE) interest income increased $1.4 million
for the second quarter of 1997 compared to the same period of 1996. This
increase was primarily a result of the $116.6 million increase in average
earning assets, less the $97.3 million increase in average interest bearing
liabilities.
Total FTE interest income increased $3.0 million over second quarter 1996.
This increase is also primarily a result of the increase in average earning
assets. Contributing to the increase in interest income was a 19 basis point
increase in the yield on average earning assets, primarily driven by a 36 basis
point increase in the yield earned on the securities available for sale
portfolio. During the same time period, total interest expense increased $1.6
million. The cost of interest bearing liabilities increased 22 basis points, as
certificates of deposit and short-term borrowing costs increased. The increase
in average interest bearing liabilities also contributed to the increase in
overall interest expense.
For the first six months of 1997, net FTE interest income increased $2.7
million over the comparable period of 1996. This increase can be attributed to a
$114.0 million increase in average earning assets, as well as a 6 basis point
increase in the interest rate spread.
As previously stated, net interest margin is a measure of an entity's
ability to utilize its earning assets in relation to the interest cost of
funding. The net interest margin increased to 4.68% for first six months of
1997, up from 4.65% for the comparable period in 1996. This increase in margin
can be attributed to the greater increase in the yield on average earnings
assets (14 basis points) than that of the increase in the cost of average
interest bearing liabilities (8 basis points).
9
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
COMPARATIVE ANALYSIS OF FEDERAL TAXABLE EQUIVALENT NET INTEREST INCOME
- -------------------------------------------------------------------------------------------------------------
Three months ended June 30,
ANNUALIZED
YIELD/RATE AMOUNTS VARIANCE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 (dollars in thousands) 1997 1996 TOTAL VOLUME RATE
---- ---- ---- ---- ----- ------ ----
4.91% 5.12% Interest bearing deposits $ 1 $ 4 $ (3) $ (3) $ -
- 5.62% Federal funds sold - 7 (7) (3) (4)
5.31% 5.34% Other short-term investments 43 13 30 30 -
6.78% 6.42% Securities available for sale 7,249 6,172 1,077 703 374
9.25% 9.09% Loans available for sale 92 104 (12) (14) 2
Securities held to maturity:
7.00% 5.93% Taxable 222 190 32 (2) 34
6.58% 6.95% Tax exempt 474 529 (55) (29) (26)
9.36% 9.30% Loans 15,909 14,021 1,888 1,737 151
------------------------------------------------------------------------------------
8.30% 8.11% Total interest income 23,990 21,040 2,950 2,419 531
2.96% 2.91% Money Market Deposit Accounts 695 761 (66) (81) 15
1.60% 1.61% NOW accounts 469 459 10 13 (3)
2.82% 3.00% Savings accounts 1,093 1,202 (109) (42) (67)
5.28% 5.18% Certificates of deposit 6,495 5,394 1,101 981 120
5.66% 5.04% Short-term borrowings 1,516 1,111 405 254 151
5.77% 10.69% OTHER BORROWINGS 291 80 211 263 (52)
------------------------------------------------------------------------------------
4.28% 4.06% TOTAL INTEREST EXPENSE 10,559 9,007 1,552 1,388 164
------------------------------------------------------------------------------------
Net interest income $13,431 $12,033 $1,398 $1,031 $367
====================================================================================
4.02% 4.05% Interest rate spread
===== ===== ====================
4.65% 4.64% Net interest margin
===== ===== ===================
FTE adjustment $ 231 $ 225
============== ======= =======
<PAGE>
<CAPTION>
Six months ended June 30,
ANNUALIZED
YIELD/RATE AMOUNTS VARIANCE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 (dollars in thousands) 1997 1996 TOTAL VOLUME RATE
---- ---- ---- ---- ----- ------ ----
4.45% 4.97% Interest bearing deposits $ 3 $ 9 $ (6) $ (5) $ (1)
5.27% 5.79% Federal funds sold 6 8 (2) (2) -
5.23% 5.22% Other short-term investments 84 22 62 62 -
6.74% 6.41% Securities available for sale 13,749 11,875 1,874 1,261 613
8.44% 8.73% Loans available for sale 174 226 (52) (44) (8)
Securities held to maturity:
6.86% 6.91% Taxable 428 434 (6) (1) (5)
6.61% 7.26% Tax exempt 992 1,061 (69) 31 (100)
9.32% 9.27% LOANS 31,080 27,625 3,455 3,390 65
------------------------------------------------------------------------------------
8.27% 8.13% Total interest income 46,516 41,260 5,256 4,692 564
2.93% 2.93% Money Market Deposit Accounts 1,373 1,581 (208) (204) (4)
1.62% 1.80% NOW accounts 941 908 33 131 (98)
2.84% 3.01% Savings accounts 2,179 2,371 (192) (51) (141)
5.26% 5.25% Certificates of deposit 12,652 10,906 1,746 1,767 (21)
5.37% 5.10% Short-term borrowings 2,501 1,751 750 661 89
5.71% 10.69% OTHER BORROWINGS 572 160 412 518 (106)
------------------------------------------------------------------------------------
4.22% 4.14% TOTAL INTEREST EXPENSE 20,218 17,677 2,541 2,822 (281)
------------------------------------------------------------------------------------
Net interest income $26,298 $23,583 $2,715 $1,870 $ 845
====================================================================================
4.05% 3.99% Interest rate spread
===== ===== ====================
4.68% 4.65% Net interest margin
===== ===== ===================
FTE adjustment $ 474 $ 442
============== ======= =======
</TABLE>
10
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a valuation allowance established to provide
for the estimated possible losses related to the collection of the Bank's loan
portfolio. The allowance is maintained at a level considered adequate to provide
for loan loss exposure based on management's estimate of potential future losses
considering an evaluation of portfolio risk, prevailing and anticipated economic
factors, and past loss experience. Management determines the provision and
allowance for loan losses based on a number of factors including a comprehensive
in-house loan review program conducted throughout the year. The loan portfolio
is continually evaluated in order to identify potential problem loans, credit
concentration, and other risk factors such as current and projected economic
conditions. The allowance for loan losses to outstanding loans at June 30, 1997
is 1.59%, up from 1.52% for the same period in 1996. Management considers the
allowance for loan losses to be adequate based on evaluation and analysis of the
loan portfolio.
Table 3 reflects changes to the allowance for loan losses for the periods
presented. The allowance is increased by provisions for losses charged to
operations and is reduced by net charge-offs. Charge-offs are made when the
collectability of loan principal within a reasonable time is unlikely. Any
recoveries of previously charged-off loans are credited directly to the
allowance for loan losses. Net charge-offs for the quarter ended June 30, 1997
increased 36.1% from the prior years second quarter. Net charge-offs for the six
months ended June 30, 1997 have increased 12.3% over the comparable period of
1996. Annualized net charge-offs to average loans has increased to 0.35% for the
second quarter of 1997, up from 0.29% for the comparable period of 1996.
Management feels it prudent to prospectively increase the allowance for loan
loss in view of the increased loan volume.
<TABLE>
<CAPTION>
TABLE 3
ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
(dollars in thousands) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of period $10,677 $9,173 $10,473 $9,120
Recoveries 205 300 395 462
Charge-offs (797) (735) (1,498) (1,444)
- --------------------------------------------------------------------------------------------------------
Net charge-offs (592) (435) (1,103) (982)
Provision for loan losses 1,000 700 1,715 1,300
- --------------------------------------------------------------------------------------------------------
Balance, end of period $11,085 $9,438 $11,085 $9,438
- --------------------------------------------------------------------------------------------------------
<CAPTION>
COMPOSITION OF NET CHARGE-OFFS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and agricultural $ (110) 19% $ (243) 56% $ (362) 33% $ (496) 51%
Real estate mortgage (14) 2% (71) 16% (7) 1% (83) 8%
Consumer (468) 79% (121) 28% (734) 66% (403) 41%
- --------------------------------------------------------------------------------------------------------
Net charge-offs $ (592) 100% $ (435) 100% $(1,103) 100% $ (982) 100%
- --------------------------------------------------------------------------------------------------------
Annualized net charge-offs
to average loans 0.35% 0.29% 0.33% 0.33%
- --------------------------------------------------------------------------------------------------------
Annualized net charge-offs to average loans for the year ended
December 31, 1996 0.29%
- --------------------------------------------------------------------------------------------------------
</TABLE>
NONINTEREST INCOME
Table 4 below presents quarterly and period to date noninterest income.
Noninterest income for the second quarter of 1997, excluding security gains and
nonrecurring income, increased $0.2 million or 11.0% when compared to second
quarter of 1996. Service charges on deposit accounts were a major contributor to
this increase. This is a result of placing emphasis on collection, instead of
waiver, of overdraft charges on deposit accounts. Trust income has continued its
growth trend as the Trust departments managed assets have steadily increased.
For the six month period ended June 30, 1997, excluding security gains and
nonrecurring income, noninterest income increased $0.4 million or 11.4% compared
to the same period during 1996.
Security gains decreased $0.2 million for the second quarter 1997 as
compared to second quarter 1996. This decrease can be attributed to the change
in market conditions between the two periods. Other income for the second
quarter 1997 includes a one-time gain of $0.2 million for the sale of the Hamden
branch to The National Bank of Delaware County.
11
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
NONINTEREST INCOME
- -----------------------------------------------------------------------------------------------------
First SECOND SIX Third Fourth Twelve
(dollars in thousands) Quarter QUARTER MONTHS Quarter Quarter Months
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997
Trust income $ 686 $ 687 $1,373
Service charges on deposit accounts 904 933 1,837
Securities gains 17 1 18
Other income 413 650 1,063
- -----------------------------------------------------------------------------------------------------
Total noninterest income $2,020 $2,271 $4,291
- -----------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1996
Trust income $ 654 $ 655 $1,309 $ 654 $ 679 $2,642
Service charges on deposit accounts 775 799 1,574 847 951 3,372
Securities gains 792 219 1,011 194 (26) 1,179
Other income 363 394 757 431 481 1,669
- -----------------------------------------------------------------------------------------------------
Total noninterest income $2,584 $2,067 $4,651 $2,126 $2,085 $8,862
- -----------------------------------------------------------------------------------------------------
</TABLE>
NONINTEREST EXPENSE AND OPERATING EFFICIENCY
Table 5 presents components of noninterest expense as well as selected operating
efficiency ratios. Noninterest expense for the second quarter and six months
ended June 30, 1997 experienced a $0.4 million decrease compared to the same
time periods of 1996.
Salaries and wages decreased by $0.2 million for the first six months of
1997, compared to the same period during 1996. This salary reduction resulted
from a decline of 35 average full-time equivalent employees, primarily through
normal attrition without replacement.
Legal, audit, and outside services expense declined $0.2 million for the
six months ended June 30, 1997 compared to the same period in 1996. During the
first six months of 1996, the Company invested $0.1 million in a reengineering
initiative to enhance customer service and operating efficiencies.
Loan collection and other loan related expenses decreased by $0.1 million
between second quarter 1997 and the same period in 1996. The reduction can be
attributed to the decline in Other Real Estate Owned (OREO) balances, lowering
the holding and disposition cost of these properties.
Two important operating efficiency measures that the Company closely
monitors are the efficiency and expense ratios. The efficiency ratio is computed
as total noninterest expense (excluding nonrecurring charges) divided by net
interest income plus noninterest income (excluding net security gains and losses
and nonrecurring income). The efficiency ratio declined to 53.4% in the second
quarter of 1997 from 62.2% for the same period of 1996. This favorable decline
was a result of the increase in net interest income, while maintaining
noninterest expense at a stable level. The expense ratio is computed as total
noninterest expense (excluding nonrecurring charges) less noninterest income
(excluding net security gains and losses and nonrecurring income) divided by
average assets. The expense ratio declined to 2.1% for the second quarter 1997
from 2.5% for the same period of 1996. Continuing expense control efforts have
had a favorable impact on operating efficiency ratios, as both of the measures
reflect.
12
<PAGE>
<TABLE>
<CAPTION>
TABLE 5
NONINTEREST EXPENSE AND PRODUCTIVITY MEASUREMENTS
- -------------------------------------------------------------------------------------------------------
(dollars in thousands) First SECOND SIX Third Fourth Twelve
1997 Quarter QUARTER MONTHS Quarter Quarter Months
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and wages $3,042 $3,150 $ 6,192
Employee benefits 1,309 1,097 2,406
Net occupancy expense 654 654 1,308
Equipment expense 436 408 844
FDIC/FICO assessment 28 29 57
Legal, audit, and outside services 930 891 1,821
Loan collection and other loan
related expenses 423 375 798
Amortization of intangible assets 378 359 737
Other operating expense 1,359 1,303 2,662
- -------------------------------------------------------------------------------------------------------
Total noninterest expense $8,559 $8,266 $16,825
- -------------------------------------------------------------------------------------------------------
Efficiency ratio 57.56% 53.38% 55.43%
Expense ratio 2.27% 2.05% 2.16%
Average full-time equivalent
employees 498 496 497
Average assets per average full-time
equivalent employee (millions) $ 2.3 $ 2.5 $ 2.4
- -------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1996
Salaries and wages $3,208 $3,174 $ 6,382 $3,146 $3,236 $12,764
Employee benefits 1,244 1,115 2,359 1,209 1,485 5,053
Net occupancy expense 674 624 1,298 596 497 2,391
Equipment expense 462 441 903 421 441 1,765
FDIC/FICO assessment 1 - 1 1 - 2
Legal, audit, and outside services 983 1,086 2,069 958 846 3,873
Loan collection and other loan
related expenses 343 520 863 459 544 1,866
Amortization of intangible assets 395 395 790 395 395 1,580
Other operating expense 1,276 1,281 2,557 1,275 1,296 5,128
- -------------------------------------------------------------------------------------------------------
Total noninterest expense $8,586 $8,636 $17,222 $8,460 $8,740 $34,422
- -------------------------------------------------------------------------------------------------------
Efficiency ratio 64.34% 62.23% 63.26% 58.29% 58.52% 60.74%
Expense ratio 2.55% 2.46% 2.51% 2.30% 2.33% 2.41%
Average full-time equivalent
employees 534 530 532 516 503 521
Average assets per average full-time
equivalent employee (millions) $ 2.0 $ 2.1 $ 2.1 $ 2.2 $ 2.3 $ 2.1
- -------------------------------------------------------------------------------------------------------
</TABLE>
INCOME TAXES
Income tax expense for the second quarter of 1997 was $2.2 million, compared
with $1.8 million for the second quarter of 1996. For the first six months of
1997, income tax expense amounted to $4.1 million, compared with $3.6 million in
the first half of 1996. The year-to-date increase in income tax expense of $0.5
million is primarily due to a $2.3 million, or 24.9% increase in income before
income taxes. Increased income was partially offset by a decrease in the
effective tax rate of 35% for both the quarter and six months ended June 30,
1997, compared to 39% for the same time periods of 1996. The reduction in the
effective tax rate can be attributed to a tax savings strategy implemented in
June of 1996.
13
<PAGE>
<TABLE>
<CAPTION>
TABLE 6
AVERAGE BALANCES
- --------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
(dollars in thousands) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale $ 425,756 $ 382,110 $ 409,596 $ 372,608
Securities held to maturity 41,618 43,496 42,843 42,006
- --------------------------------------------------------------------------------------------
Total securities 467,374 425,606 452,439 414,614
- --------------------------------------------------------------------------------------------
Loans available for sale 3,972 4,602 4,158 5,204
Loans 681,777 607,288 672,350 599,015
Deposits 970,344 910,351 961,198 906,663
Short-term borrowings 107,449 88,652 93,975 68,992
Other borrowings 20,191 3,009 20,192 3,010
Stockholders' equity 109,546 100,974 109,264 104,026
Assets 1,217,078 1,110,296 1,193,585 1,090,098
Earning assets 1,159,612 1,043,000 1,134,045 1,020,026
Interest bearing liabilities $ 988,987 $ 891,699 $ 965,929 $ 857,941
- --------------------------------------------------------------------------------------------
</TABLE>
SECURITIES
Average total securities increased $41.8 million, or 9.8%, for the second
quarter of 1997 over the same period of 1996. Also, a $37.8 million, or 9.1%
increase in average securities occurred for the six month period ended June 30,
1997 compared to the same period of 1996. The majority of this increase was in
the securities available for sale category. During the second quarter of 1997,
the securities portfolio represented 40.3% of average earning assets.
Investments are primarily U.S. Treasury and U.S. Government agency guaranteed
securities classified as available for sale. Held to maturity securities are
obligations of the State of New York political subdivisions and do not include
any direct obligations of the State of New York. At June 30, 1997, the
composition of the securities portfolio was 93% available for sale and 7% held
to maturity.
LOANS
Average loan volume for the three months ended June 30, 1997 increased $74.5
million, or 12.3% over second quarter 1996. The loan growth has been present in
all loan categories, with the most significant increases in commercial and
consumer loans. Commercial and consumer loans increased $42.1 and $30.1 million,
respectively.
The Company has experienced an increase in the demand for commercial loans,
with growth of $27.2 million since year-end 1996, primarily in the business and
real estate categories. The consumer loan volume increase can be attributed to
homequity loans. Homequity volumes have increased $10.4 million since year-end
1996, primarily in the revolving category. The company does not engage in highly
leveraged transactions or foreign lending activities.
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets consist of nonaccrual loans and other real estate owned
(OREO). Loans are generally placed on nonaccrual when principal or interest
payments become ninety days past due, unless the loan is well secured and in the
process of collection. Loans may also be placed on nonaccrual when circumstances
indicate that the borrower may be unable to meet the contractual principal or
interest payments. OREO represents property acquired through foreclosure and is
valued at the lower of the outstanding loan balance or fair market value, less
any estimated disposal costs.
14
<PAGE>
Total nonperforming assets decreased $1.1 million, or 20.3% at June 30,
1997 compared to June 30, 1996. Impaired commercial and agricultural loans
declined $1.2 million, while real estate and consumer loans experienced minimal
increases between the reporting periods. The changes in nonperforming assets are
presented in Table 7 below.
<TABLE>
<CAPTION>
TABLE 7
NONPERFORMING ASSETS AND RISK ELEMENTS
- ------------------------------------------------------------------------------------------------------
JUNE 30, December 31, June 30,
(dollars in thousands) 1997 1996 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Impaired commercial and agricultural loans $2,379 66% $2,441 73% $3,571 76%
Other nonaccrual loans:
Real estate mortgage 513 14% 251 8% 492 11%
Consumer 727 20% 628 19% 606 13%
- ------------------------------------------------------------------------------------------------------
Total nonaccrual loans 3,619 100% 3,320 100% 4,669 100%
- ------------------------------------------------------------------------------------------------------
Other real estate owned 887 1,242 986
- ------------------------------------------------------------------------------------------------------
Total nonperforming assets 4,506 4,562 5,655
- ------------------------------------------------------------------------------------------------------
Loans 90 days or more past due and still accruing:
Real estate mortgage 343 49% 344 33% 360 45%
Commercial and agricultural 172 24% 418 40% 285 35%
Consumer 191 27% 289 27% 159 20%
- ------------------------------------------------------------------------------------------------------
Total 706 100% 1,051 100% 804 100%
- ------------------------------------------------------------------------------------------------------
Restructured loans, in compliance with modified terms:
Commercial and agricultural - - -
- ------------------------------------------------------------------------------------------------------
Total assets containing risk elements $5,212 $5,613 $6,459
- ------------------------------------------------------------------------------------------------------
Total nonperforming assets to loans 0.65% 0.70% 0.91%
Total assets containing risk elements to loans 0.75% 0.86% 1.04%
Total nonperforming assets to assets 0.36% 0.40% 0.50%
Total assets containing risk elements to assets 0.42% 0.49% 0.57%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 8
CHANGES IN NONACCRUAL AND IMPAIRED LOANS
- ------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
- ------------------------------------------------------------------------------
(dollars in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $3,258 $5,431 $ 3,320 $ 4,817
Loans placed on nonaccrual 1,563 1,622 2,688 3,660
Charge-offs (494) (431) (882) (879)
Payments (306) (1,223) (1,045) (2,082)
Transfers to OREO (247) (138) (307) (255)
Loans returned to accrual (155) (592) (155) (592)
- ------------------------------------------------------------------------------
Balance at end of period $3,619 $4,669 $ 3,619 $ 4,669
- ------------------------------------------------------------------------------
CHANGES IN OREO
Balance at beginning of period $ 732 $1,989 $ 1,242 $ 2,000
Additions 286 150 352 267
Sales (117) 1,056) (604) 1,103)
Write-downs (14) (97) (103) (178)
- ------------------------------------------------------------------------------
Balance at end of period $ 887 $ 986 $ 887 $ 986
- ------------------------------------------------------------------------------
</TABLE>
DEPOSITS
Customer deposits represent the greatest source of funding assets. Average total
deposits for the quarter ended June 30, 1997, increased $60.0 million, or 6.6%
from the same period in 1996. Time deposits experienced a $74.7 million
increase, while core deposit categories saw a decline in average balances. The
increase in time deposits can be attributed to municipal time deposits. Average
municipal time deposits for second quarter 1997 increased $69.4 million over
second quarter 1996, primarily to fund the increase in loan demand. During
second quarter of 1997, average core deposits (DDA, Savings, MMDA and NOW's)
decreased by $14.7 million compared to second quarter 1996.
15
<PAGE>
BORROWED FUNDS
The Company's borrowed funds consist of short-term borrowings and other
borrowings. Short-term borrowings include federal funds purchased, securities
sold under agreement to repurchase, and Federal Home Loan Bank advances. Other
borrowings include a 366 day advance, hence one day longer than would qualify
for short-term classification, maturing in July 1997. Average borrowings for the
six months ended June 30, 1997 increased $42.2 million, or 58.6% as compared to
the same period of 1996. The Company has increased its use of borrowings as a
source of funding the continued loan growth. Utilization of brokered repurchase
agreements as a source of funds have increased an average of $16.3 million for
the first six months of 1997 compared to the same period in 1996.
CAPITAL AND DIVIDENDS
Stockholders' equity of $114 million represents 9.2% of total assets at June 30,
1997, compared with $106 million, or 9.3% at December 31, 1996 and $101 million,
or 9.0% a year previous. The equity increase is primarily due to earnings
retention. Also contributing to the increase in equity is a reduction in the
depreciated value reflected in the mark to market of the securities available
for sale portfolio, partially offset by an increase in shares held in the
treasury.
On a per share basis, cash dividends declared were increased in December
1996 as the Company declared a 5% stock dividend in October 1996 followed by a
15% increase in the cash dividend to $0.15 per share. In July of 1997, the
Company raised the third quarter cash dividend to $0.17 per share, a 13%
increase. The dividend increase reflects the Company's earnings and capital
strength. The Company does not have a target dividend payout ratio, rather the
Board of Directors considers the Company's earnings position and earnings
potential when making dividend decisions.
The accompanying Table 10 presents the high, low and closing sales price
for the common stock as reported on the NASDAQ National Market System, and cash
dividends declared per share of common stock. At June 30, 1997, total market
capitalization of the Company's common stock was approximately $229 million
compared to $150 million at December 31, 1996 and $132 million at June 30, 1996.
The change in market capitalization is due to an increase in the stock's market
price. The Company's price to book value ratio was 2.02 at June 30, 1997 and
1.30 a year ago. The per share market price was 15 times annualized earnings at
June 30, 1997 and 12 times annualized earnings at June 30, 1996.
Capital is an important factor in ensuring the safety of depositors'
accounts. For both 1996 and 1995, the Company earned the highest possible
national safety and soundness rating from two national bank rating services,
Bauer Financial Services and Veribanc, Inc. In July of 1997, the Company earned
the Blue Ribbon Bank designation from Veribanc for the first quarter of 1997.
Their ratings are based on capital levels, loan portfolio quality and security
portfolio strength.
As the capital ratios in Table 9 indicate, the Company remains well
capitalized. Capital measurements are significantly in excess of regulatory
minimum guidelines and meet the requirements to be considered well capitalized
for all periods presented. Tier 1 and Risk-based Capital ratios have regulatory
minimum guidelines of 4% and 8% respectively, with requirements to be considered
well capitalized of 6% and 10%, respectively.
<PAGE>
<TABLE>
<CAPTION>
TABLE 9
CAPITAL MEASUREMENTS
- --------------------------------------------------------------------------------------------
First SECOND Third Fourth
1997 Quarter QUARTER Quarter Quarter
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 leverage ratio 8.91% 8.75%
Tier 1 capital ratio 14.53% 14.46%
Total risk-based capital ratio 15.78% 15.71%
Cash dividends as a percentage of net income 36.46% 34.27%
Per common share:
Book value $12.60 $13.33
Tangible book value $11.47 $12.24
- --------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
1996
Tier 1 leverage ratio 8.83% 8.55% 8.49% 8.70%
Tier 1 capital ratio 14.73% 14.29% 14.00% 14.06%
Total risk-based capital ratio 15.98% 15.54% 15.25% 15.31%
Cash dividends as a percentage of net income 36.90% 38.55% 34.87% 36.10%
Per common share:
Book value $12.64 $12.58 $12.81 $12.72
Tangible book value $11.27 $11.25 $11.51 $11.52
- --------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
TABLE 10
QUARTERLY COMMON STOCK AND DIVIDEND INFORMATION
- ----------------------------------------------------------------------
Cash
Dividends
Quarter Ending High Low Close Declared
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
March 31 $16.22 $15.24 $16.19 $0.124
June 30 16.67 15.60 15.60 0.124
September 30 16.43 15.00 16.07 0.124
December 31 19.00 16.07 18.00 0.150
- ----------------------------------------------------------------------
1997
MARCH 31 $20.00 $17.63 $19.50 $0.150
JUNE 30 26.88 19.50 26.88 0.150
- ----------------------------------------------------------------------
</TABLE>
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary objectives of asset and liability management are to provide for the
safety of depositor and investor funds, assure adequate liquidity, and maintain
an appropriate balance between interest sensitive earning assets and interest
bearing liabilities. Liquidity management involves the ability to meet the cash
flow requirements of customers who may be depositors wanting to withdraw funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. The Asset/Liability Management Committee (ALCO) is
responsible for liquidity management and has developed guidelines which cover
all assets and liabilities, as well as off balance sheet items that are
potential sources or uses of liquidity. Liquidity must also provide the
flexibility to implement appropriate strategies and tactical actions.
Requirements change as loans grow, deposits and securities mature, and payments
on borrowings are made. Interest rate sensitivity management seeks to avoid
widely fluctuating net interest margins and to ensure consistent net interest
income through periods of changing economic conditions.
The Company's primary measure of liquidity is called the basic surplus,
which compares the adequacy of cash sources to the amounts of volatile funding
sources. This approach recognizes the importance of balancing levels of cash
flow liquidity from short and long-term securities with the availability of
dependable borrowing sources. Accordingly, the Company has established borrowing
agreements with other banks (Federal Funds), the Federal Home Loan Bank of New
York (short and long-term borrowings which are denoted as advances), and
repurchase agreements with investment companies.
At June 30, 1997 and 1996, the Company's basic surplus ratios (net access
to cash and secured borrowings as a percentage of total assets) were
approximately 8.3% and 8.6%, respectively. The Company has set a present
internal minimum guideline range of 5% to 7%. As these ratios indicate, the
Company's liquidity is well within management standards.
Interest rate risk is determined by the relative sensitivities of earning
asset yields and interest bearing liability costs to changes in interest rates.
The method by which banks evaluate interest rate risk is to look at the interest
sensitivity gap, the difference between interest sensitive assets and interest
sensitive liabilities repricing during the same period, measured at a specific
point in time. Through analysis of the interest sensitivity gap, the Company
attempts to position its assets and liabilities to maximize net interest income
in several different interest rate scenarios. As of June 30, 1997, the interest
sensitivity gap indicates that the Company is liability sensitive. The liability
sensitivity is a result of the increased loan growth being funded through
short-term deposits and borrowings. The Company is currently positioned to
benefit from a declining interest rate environment; however, the nature and
timing of the benefit will be initially impacted by the extent to which core
deposit borrowing rates are decreased as rates lower. At June 30, 1997, a 100
basis point gradual increase or decrease in interest rates was estimated to have
less than a 4.1% impact on net interest income relative to a flat rate
environment over the next twelve month period.
17
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SELECTED FIVE YEAR DATA 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net income $ 12,179 $ 9,329 $ 6,508 $ 8,505 $ 8,043
Return on average assets 1.10% 0.90% 0.64% 0.93% 0.94%
Return on average equity 11.80% 9.18% 6.53% 8.79% 8.89%
Net interest margin 4.69% 4.43% 4.81% 5.26% 5.52%
Efficiency ratio 60.74% 65.92% 70.22% 71.05% 69.48%
Expense ratio 2.41% 2.51% 2.96% 3.21% 3.19%
Tier 1 leverage ratio 8.70% 8.80% 9.05% 9.24% 9.01%
Tier 1 capital ratio 14.06% 15.21% 16.09% 15.40% 15.30%
Total risk-based capital ratio 15.31% 16.46% 17.35% 16.66% 16.61%
Cash dividends as a percentage of
net income 36.10% 42.47% 55.22% 38.82% 36.94%
Per Common Share:
Net income $ 1.43 $ 1.06 $ 0.73 $ 0.95 $ 0.92
Cash dividends declared $ 0.522 $ 0.450 $ 0.407 $ 0.375 $ 0.341
Book value $ 12.72 $ 12.44 $ 11.12 $ 11.41 $ 10.72
Tangible book value $ 11.52 $ 11.11 $ 10.01 $ 9.93 $ 8.74
Stock dividends distributed 5.00% 5.00% 5.00% 5.00% 5.00%
Market price:
High $ 19.00 $ 17.14 $ 15.98 $ 15.98 $ 12.53
Low $ 15.00 $ 14.29 $ 12.96 $ 10.90 $ 8.62
End of year $ 18.00 $ 16.67 $ 14.96 $ 15.76 $ 11.93
Price/earnings multiple 12.59X 15.77x 12.72x 10.79x 12.89x
Price/book value multiple 1.42X 1.34x 1.34x 1.38x 1.11x
Total assets $1,138,986 $1,106,266 $1,044,557 $953,907 $868,616
Total stockholders' equity $ 106,264 $ 108,044 $ 98,307 $101,108 $ 94,012
Average common shares
outstanding (thousands) 8,513 8,800 8,939 8,897 8,732
- ------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
This item is omitted, as there have been no material legal proceedings initiated
or settled during the quarter ended June 30, 1997.
Item 2 -- Changes in Securities
Following are listed changes in the Company's Common Stock outstanding during
the quarter ended June 30, 1997 as well as certain actions which have been taken
which may affect the number of shares of Common Stock (shares) outstanding in
the future. There was no Preferred Stock outstanding during the quarter ended
June 30, 1997.
The Company has Stock Option Plans covering key employees. In May 1997,
non-qualified stock options were granted for 1,200 shares of common stock at an
option price of $20.15 per share. These options vest over a four-year period
with the first vesting date one-year from the date of grant. Outstanding at June
30, 1997 are non-qualified stock options covering 340,764 shares at exercise
prices ranging between $9.01 and $20.15 with expiration dates between January
10, 1998, and May 12, 2007. There are 576,550 shares of authorized common stock
designated for possible issuance under the Plans, including the aforementioned
shares. The number of shares designated for the Plans, the number of shares
under existing options and the option price per share may be adjusted upon
certain changes in capitalization, such as stock dividends, stock splits and
other occurrences as enumerated in the Plans. (FORMs S-8, Registration Statement
Nos. 33-18976 and 33-77410, filed with the Commission on December 9, 1987 and
April 6, 1994, respectively).
In 1995, the Company granted its then Chairman stock options in connection
with the discharge of severance obligations of the Company and the Bank under
his employment agreement. The agreement issued options covering 136,437 and
28,593 shares with exercise prices of $14.69 and $15.33, respectively, and an
expiration date of January 31, 1997 (the number of shares under option and the
option price per share have been adjusted for stock dividends). The Company
filed a registration statement relating to these option shares. These stock
options did not serve to reduce the number available under the previously
mentioned Plans. The former Chairman exercised 1,000 options in November 1996
and 164,030 in January 1997 resulting in no further shares available for
exercise. Shares were issued from authorized, but unissued common stock. (FORM
S-8, Registration Statement No. 333-02925, filed with the Commission on April
29, 1996).
The Company has a Dividend Reinvestment Plan for stockholders under which
no new shares of common stock were issued for the quarter ended June 30, 1997.
There are 500,726 shares of authorized but unissued common stock designated for
possible issuance under the Plan (the number of shares available has been
adjusted for stock dividends and splits). (FORM S-3, Registration Statement No.
33-12247, filed with the Commission on February 26, 1987).
The Company's Board of Directors has reserved 25,000 of authorized but
unissued shares for future payment of an annual Board retainer. In January 1997,
each Director was granted 165 shares which are restricted from one to three
years for payment of their 1997 Board retainer. Shares were purchased from
treasury therefore the number of authorized and unissued shares was not
effected.
The Company's Board of Directors has authorized the purchase on the open
market by the Company of additional shares of treasury stock. These treasury
shares are to be used for a variety of corporate purposes, primarily to meet the
needs of the Company's Employee Stock Ownership Plan, Automatic Dividend
Reinvestment and Stock Purchase Plan, Stock Option Plans, Retirement Savings
Plan, Restricted Stock Agreements and Bank Trust Department directed IRA and
HR-10 accounts. Purchases and sales during 1997 totalled 131,900 and 140,273,
respectively, with 473,076 shares in treasury at June 30, 1997. Purchases were
made at the prevailing market price in effect at the dates of the transactions.
Subsequent sales to both the Company's Employee Stock Ownership Plan and
Dividend Reinvestment and Stock Purchase Plan, if any, were made at the five day
average of the highest and lowest quoted selling price of the Company's common
stock on the National Market System of NASDAQ.
The Company currently is authorized to issue 2.5 million shares of
preferred stock, no par value, $1.00 stated value. The Board of Directors is
authorized to fix the particular designations, preferences, rights,
qualifications, and restrictions for each series of preferred stock issued. The
Company has a Stockholder Rights Plan (Plan) designed to ensure that any
potential acquiror of the Company negotiate with the Board of Directors and that
all Company stockholders are treated equitably in the event of a takeover
attempt. When the Plan was adopted, the Company paid a dividend of one Preferred
Share Purchase Right (Right) for each outstanding share of common stock of the
Company. Similar Rights are attached to each share of the Company's common stock
issued after November 15, 1994, the date of adoption subject to adjustment.
Under the Plan, the Rights will not be exercisable until a person or group
acquires beneficial ownership of 20 percent or more of the Company's outstanding
common stock, begins a tender or exchange offer for 25 percent or more of the
Company's outstanding common stock, or an adverse person, as declared by the
Board of Directors, acquires 10 percent or more of the Company's outstanding
common stock. Additionally, until the occurrence of such an event, the Rights
are not severable from the Company's common stock and therefore, the Rights will
be transferred upon the transfer of shares of the Company's common stock. Upon
the occurrence of such events, each Right entitles the holder to purchase one
one-hundredth of a share of Series R Preferred Stock, no par value, and $1.00
stated value per share of the Company at a price of $100.
19
<PAGE>
The Plan also provides that upon the occurrence of certain specified
events, the holders of Rights will be entitled to acquire additional equity
interests in the Company or in the acquiring entity, such interests having a
market value of two times the Right's exercise price of $100. The Rights, which
expire November 14, 2004, are redeemable in whole, but not in part, at the
Company's option prior to the time they are exercisable, for a price of $0.01
per Right.
Item 3 -- Defaults Upon Senior Securities
This item is omitted because there were no defaults upon the Registrant's senior
securities during the quarter ended June 30, 1997.
Item 4 -- Submission of Matters to a Vote of Security Holders
This item is omitted as there is no disclosure required for the quarter ended
June 30, 1997. The results of the election of directors and ratification of
auditors at the Annual Meeting of Stockholders held April 19, 1997 was
previously reported in Form 10-Q, March 31, 1997.
Item 5 -- Other Information
Not Applicable
Item 6 -- Exhibits and Reports on FORM 8-K
An index to exhibits follows the signature page of this FORM 10-Q.
No reports on FORM 8-K were filed by the Registrant during the quarter ended
June 30, 1997.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on FORM 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized, this 12th day of August, 1997.
NBT BANCORP INC.
By: /S/ JOE C. MINOR
-----------------
Joe C. Minor
Vice President
Chief Financial Officer and Treasurer
21
<PAGE>
INDEX TO EXHIBITS
The following documents are attached as Exhibits to this FORM 10-Q or,
if annotated by the symbol *, are incorporated by reference as Exhibits as
indicated by the page number or exhibit cross-reference to the prior filings of
the Registrant with the Commission.
<TABLE>
<CAPTION>
FORM 10-Q
Exhibit Exhibit
Number Cross-Reference
- --------- ---------------
<S> <C> <C>
10.1 Lease extension of Vail Mills Office Herein
10.2 Lease extension of Rome Office Herein
10.3 Supplemental Retirement Income Plan between NBT Bank, National Herein
Association and Certain Management and Highly Compensated
Employees made as of January 1, 1996.
27.1 Financial Data Schedule for the six months ended June 30, 1997 Herein
</TABLE>
22
<PAGE>
EXHIBIT 10.1
Lease extension of Vail Mills Office
<PAGE>
NBT BANK
April 1, 1997
Mr. Fred Showers
Mrs. Reta L. Showers
3786 State Highway 30 #1
Amsterdam, New York 12010
Re: Land lease located at Route 30, Mayfield, New York
Expiration Date: June 30, 1997
Dear Mr. & Mrs. Showers:
According to the terms of the lease for land located at Route 30 Mayfield, New
York, we wish to exercise the option to renew such lease beginning July 1, 1997.
We offer to extend the term to cover a one year period commencing July 1, 1997
through June 30, 1998 with the option to renew. The annual rental would be six
thousand six hundred and fifteen dollars ($6,615) payable in monthly payments of
$551.25. All other terms and conditions would remain the same. Second year would
commence July 1, 1998 through June 30, 1999 would be six thousand nine hundred
forty five and seventy five (6,945.75) payable in monthly payments of $578.88.
If the terms and conditions in this letter meet with your approval, please sign
both copies and return one to my attention in the self-addressed, post-paid
envelope for our files. Should you have any questions, please do not hesitate to
give me a call at 607-337-6115. Thank you.
Sincerely,
/s/Donna L. Deuel
--------------
Donna L. Deuel
Vice President
Administrative Services
MAY 9, 1997 /S/FRED SHOWERS
- ----------- ---------------
Date Fred Showers
MAY 9, 1997 /S/RETA SHOWERS
- ----------- ---------------
Date Reta Showers
NBT Bank, N.A., 52 South Broad Street, P.O. Box 351, Norwich, New York
13815*Telephone 607-337-6000
<PAGE>
EXHIBIT 10.2
Lease extension of Rome Office
<PAGE>
LEASE EXTENSION AGREEMENT
AGREEMENT made as of the 20th day of May, 1997 by and between NEW PLAN
REALTY TRUST having an office at 1120 Avenue of the Americas, New York, NY
10036, as Landlord and NBT BANK N.A., having an address at 52 South Broad
Street, Norwich, NY 13815, as Tenant.
WITNESSETH:
WHEREAS, Landlord and Tenant's predecessor entered into that certain
lease ("Lease") dated July 14, 1987 for Rental Space FS2 situated in the
shopping center known as Westgate Manor, Rome, NY.
WHEREAS, Landlord and Tenant desire to extend the term of the Lease and
modify certain terms contained therein.
NOW, THEREFORE, for and in consideration of the covenants herein contained
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, it is agreed as follows:
1. LEASE TERM. Landlord and Tenant desire to and hereby do extend the term
for a period of five (5) years from September 1, 1997 to August 31, 2002.
2. FIXED MINIMUM ANNUAL RENT. The Fixed Minimum Annual Rental of Forty
Thousand and 00/xx ($40,000.00) Dollars payable in equal monthly payments of
$3,333.33 in advance without offset, deduction or credit to Landlord at its
address at 1120 Avenue of the Americas, New York, NY 10036.
3. COST OF LIVING. The minimum Annual Rent payable by Tenant shall be
augmented in accordance with this Section.
(a) For the purpose of this Section the term "base year" shall mean
1998.
(b) The adjustment described in this subdivision (b) shall be based
upon the "Consumer Price Index" published by the Bureau of Labor Statistics
<PAGE>
of the U.S. Department of Labor for Buffalo, NY CPI-U. All Items Index for
a calendar year, i.e. the average of the monthly All Items Price Indices
for the twelve months of such calendar year (hereinafter called the "Price
Index"), or a successor or substitute index appropriately adjusted. In the
event that the Price Index for any calendar year subsequent to the base
year reflects an increase in the cost of living over and above the cost of
living as reflected by such Price Index for the base year, then Landlord
shall furnish to Tenant a statement of the Price Indices for the base year
and for the applicable calendar year, and the Minimum Annual Rent shall be
augmented by payment of an additional rent adjustment which shall be paid
as follows:
(1) By or after January 31 of each year during the term of
this lease, there shall be an additional rent adjustment
based on the percentage difference between the Price Index
for the base year and the Price Index for the calendar
year immediately preceding the date of such annual
adjustment.
(2) The percentage increase thus determined shall be
multiplied by the Minimum Annual Rent reserved in this
lease as of December 31 of the preceding calendar year,
and this sum shall constitute the cost of living
additional rent adjustment which shall be paid to Landlord
within ten (10) days after submission by Landlord of the
statement of the Price Indices. The following illustrates
the intention of the parties hereto as to the computation
of the aforementioned cost of living additional rent
adjustment, if any:
Assuming that the Price Index for the base year was
102.0 and assuming that the Price Index for the year
immediately preceding the date of such adjustment was
105.0 then and in that event there would be an adjustment
for cost of living additional rent to the following extent
the percentage increase thus reflected i.e. 2.941%
2
<PAGE>
(3.0/102.0) would be multiplied by the Minimum Annual Rent
reserved in this lease as of December 31 of the preceding
calendar year, and the resulting sum would be the
additional rent payable hereunder. In the event that the
Price Index ceases to use the 1982-84 average of 100 as
the basis of calculation, or if a substantial change is
made in the terms or number of items contained in the
Price Index then the Price Index shall be adjusted to the
figure that would have been arrived at had the manner of
computing the Price Index in effect at the date of this
Lease not been altered. In the event such Price Index (or
a successor or substitute index) is not available, a
reliable governmental or other non-partisan publication
evaluating the information theretofore used in determining
the Price Index shall be used.
(c) The statement of the cost of living adjustment to be furnished by
Landlord as provided in subdivision (b) above shall consist of data prepared by
Landlord.
(d) If the term of this Lease shall commence on a date other than
January 1, Tenant shall pay a proportionate share of the additional rents under
this Section for the calendar year during which the term hereof commences, which
share shall be based upon the length of time that this Lease shall have been in
existence during such first calendar year. Upon the date of any expiration of
termination of this Lease, whether the same may be the date hereinabove set
forth for the expiration of the term (hereinafter called "lease expiration
date") or any prior or subsequent date, the entire additional rent for the
preceding calendar year and a proportionate share of the additional rent for the
3
<PAGE>
calendar year during which such expiration or termination occurs shall
immediately become due and payable by Tenant to Landlord. The said proportionate
share shall be based upon the length of time that this Lease shall have been in
existence during such latter calendar year. Promptly after said expiration or
termination, Landlord shall compute the additional rent due from Tenant, as
aforesaid, which computations shall be an estimate based upon the most recent
annual statements theretofore prepared by Landlord and furnished to Tenant under
subdivision (b) above. Within ten (10) days after the next annual statement or
statements are prepared by Landlord and furnished to Tenant, Landlord and Tenant
shall make appropriate adjustments of said estimated payments.
(e) Notwithstanding any expiration or termination of this Lease prior
to the lease expiration date, Tenant's obligation to pay any and all additional
rent under this Lease shall continue and shall cover all periods up to the lease
expiration date. Tenant's obligation to pay any and all additional rent under
this Lease and Landlord's and Tenant's obligation to make the adjustments
referred to in subdivision (e) above shall survive any expiration or termination
of this Lease.
(f) During the term hereof the Tenant agrees to deposit with the
Landlord an amount equal to the amount of the most recent additional rental
adjustment due pursuant to this Section 39. Said amount shall be divided by
twelve (12) and shall be deposited monthly by Tenant with Landlord on the first
day of each month commencing with the first month following the date that the
invoice for the most recent additional rent adjustment under this Section 43 is
sent to the Tenant by Landlord. The amounts so deposited shall be held by
Landlord as a payment on account of the next annual additional rental adjustment
to be made pursuant to this Section 43. If the amount deposited by Tenant
exceeds the amount of the next annual adjustment due than Tenant will receive a
credit for the difference. If the amount deposited by Tenant is less than the
amount of the next annual adjustment due then Tenant will remit the balance due
within ten (10) days after submission by landlord the statement.
If the most recent annual adjustment does not cover a full twelve month
period then the Tenant shall deposit as aforesaid an amount equal to the amount
of said adjustment annualized (e.g. if the most recent annual adjustment covered
4
<PAGE>
the period October, November and December and amounted to $18.00 then the Tenant
would deposit the amount of $72.00 at the rate of $6.00 a month)
4. OPTION TO EXTEND LEASE. Tenant is hereby granted the right to renew the
term of this Lease upon the same terms and conditions, except as to rent and
except that Tenant shall have no further option to renew the term of this
Lease, for one (1) additional consecutive period of five (5) years provided that
both during the entire term and also at such time the option is exercised, the
Tenant has never been and also is not in default under this Lease. It is
acknowledged by Tenant that if it was ever in default, even if later cured, it
has no right to exercise the option and the option shall be null and void. The
Tenant shall exercise its right and option to so renew the term of this Lease by
serving written notice upon the Landlord of its election to exercise said option
any time prior to one hundred eighty (180) days of the expiration date of the
initial Lease Term (time being of the essence with respect thereto). In the
event the Tenant should not timely exercise its option for extension of the
Lease as provided above, or should be in default under this Lease as so provided
above, then, in either event, the Tenant shall have no right to a renewal term
and said option shall become null and void and be of no further force or effect.
The provisions of this Section shall not inure to the benefit of or be
exercisable by any assignee or sublessee. The Fixed Minimum Annual Rent during
the option period will be as follows:
From BEGINNING 1ST OPTION YEAR TO END OF 5TH OPTION YEAR $46,000.00 per annum
($3,833.33 per month) (subject to Section 3 above of this Lease Extension).
The parties stipulate and agree that the foregoing option may only
be exercised if Tenant has, subsequent to June 1, 1997 and prior to Tenant's
exercise of the option, at Tenant's expense, performed a complete remodelling of
the Demised Premises, and if Tenant has not performed a complete remodelling of
5
<PAGE>
the Demised Premises subsequent to June 1, 1997 and prior to its purported
exercise of the foregoing option, then this option shall be null and void and
the term of the Lease shall terminate on August 31, 2002 (unless previously
terminated for other reasons).
5. INSURANCE a. Throughout the term of this lease, Tenant shall maintain at
its own cost and expense (a) Fire and extended coverage, vandalism, riot,
malicious mischief and special extended coverage insurance in an amount adequate
to cover the cost of replacement of all decorations and improvements in the
Demised Premises in the event of a loss and (b) Public liability insurance on an
occurrence basis with minimum limits of liability in an amount of Five Hundred
Thousand ($500,000.00) Dollars for bodily injury, personal injury or death to
any one person and One Million ($1,000,000.00) Dollars for bodily injury,
personal injury or death to more than one person and Fifty Thousand ($50,000.00)
Dollars with respect to damage to property by water or otherwise; and (c) Fire
insurance in amount adequate to cover the cost of replacement of all fixtures
and contents in the Demised Premises in the event of damage due to fire,
extended coverage hazards, vandalism, malicious mischief and special extended
coverage hazards. Tenant shall, at its own expense, exclude from its liability
insurance policy the "Care, Custody and Control Exclusion." If Tenant fails to
procure the required insurance, Landlord may, but shall not be required to,
obtain same for Tenant and Tenant shall promptly reimburse Landlord for the cost
thereof.
b. Tenant shall also pay to Landlord, as additional rent toward the cost of
maintaining all insurance with respect to the Shopping Center (exclusive of any
insurance premiums included in Tenant's share of Shopping Center operating costs
payable under this lease), an annual amount equal to $193.30. Tenant shall pay
such amount to Landlord in equal monthly installments in the amount of $16.10
each, together with the Minimum Annual Rent due hereunder. Notwithstanding the
foregoing, Landlord may self insure for all of the foregoing insurance.
6
<PAGE>
c. The yearly amount set forth in subparagraph (a) above (and the deposits
thereon) shall be increased yearly to reflect any increase from year to year in
the Consumer Price Index for All Urban Consumers, U.S City Average, All Items
(C.P.I.) (1982-84=100) as published by the U.S. Department of Labor, Bureau of
Labor Statistics, Washington, D.C.
6. ENVIRONMENTAL. Tenant shall not use or suffer the Demised Premises to be used
in any manner so as to create an environmental violation or hazard, nor shall
Tenant cause or suffer to be caused any chemical contamination or discharge of a
substance of any nature which is noxious, offensive or harmful or which under
any law, rule or regulation of any governmental authority having jurisdiction
constitutes a hazardous substance or hazardous waste. Tenant shall not violate
or suffer to be violated any governmental law, rule, regulation, ordinance, or
order, including those of any federal, state, county or municipal entity,
agency, or official.
Tenant shall also immediately notify Landlord in writing of any
environmental concerns of which Tenant is or becomes aware and which are raised
by any private party or government agency with regard to Tenant's business or
the Demised Premises. Tenant shall also notify landlord immediately of any
hazardous waste spills at the Demised Premises.
Not in limitation of the generality of the foregoing, but as additional
covenants, Tenant specifically agrees that (a) Tenant shall not generate,
manufacture, refine, transport, treat, store, handle, dispose or otherwise deal
with any hazardous substances or hazardous waste as now or hereafter defined by
applicable law; (b) If at any time during the term of this Lease, there shall be
required, with respect to the Demised Premises or any part thereof, any act
pursuant to or in compliance with applicable law, including the filing of any
required notice or sale or negative declaration affidavits or the preparation or
effectuation of any clean-up plans, Tenant shall immediately advise Landlord of
same, and Tenant shall be solely responsible for the cost of such compliance;
7
<PAGE>
and (c) Tenant shall defend, indemnify and hold Landlord harmless against any
liability, loss, cost or expense, including reasonable attorneys' fees and costs
(whether or not legal action has been instituted) incurred by reason of the
existence of or any failure by the Tenant to comply with any environmental law
now or hereafter in effect. For the purposes of this provision the term Tenant
shall be deemed to include Tenant, Tenant's agents, servants, employees and
invitees.
Tenant expressly acknowledges its understanding and agreement that,
during the term hereof or at or after the expiration or earlier termination of
this lease, certain notices, filings (and, possibly, sampling plans, cleanup
plans and cleanup work) may be required by law, and if this occurs then Tenant
shall, either in its own name, or, if required, in the name of the Landlord,
comply, at Tenant's own expense, with all such applicable notice, filings and
other required actions, and defend, indemnify and hold Landlord harmless from
all costs and expenses related to the same. However, Tenant shall file no
documents or take any other action under this Section without Landlord's prior
written approval thereof, and Landlord shall also have the right to file such
documents or take such action instead or on behalf of Tenant (but still at
Tenant's sole cost and expense), and Tenant shall cooperate with Landlord in so
doing. Tenant shall also (a) provide to Landlord copies of any documents filed
by Tenant pursuant to any environmental law; (b) permit Landlord to be present
at any inspection, on or off site, and at any meetings of government
environmental officials; and (c) provide Landlord with an inventory of materials
and substances dealt with by Tenant at the Demised Premises, as well as such
additional information for government filings or determinations as to whether
there has been compliance with an environmental law.
8
<PAGE>
Landlord shall also have the right to enter the Demised Premises at any
time to conduct tests to discover the facts of any alleged or potential
environmental problem.
The provisions of this section shall survive the expiration or earlier
termination of this Lease, and the Tenant shall require any permitted assignee
or sub-lessee of the Demised Premises to agree expressly in writing to comply
with all the provisions of this paragraph. 7. TRUST CLAUSE. This Agreement and
all documents, agreements, understandings and arrangements relating to this
transaction have been negotiated, executed and delivered on behalf of New Plan
Realty Trust by the Trustees or officers thereof in their representative
capacity under the Amended and Restated Declaration of Trust of New Plan Realty
Trust dated as of January 15, 1996, and not individually, and bind only the
Trust Estate of New Plan Realty Trust, and no Trustee, officer, employee, agent
or shareholder of New Plan Realty Trust shall be bound or held to any personal
liability in connection with the obligations of New Plan Realty Trust
thereunder, and any person or entity dealing with New Plan Realty Trust in
connection therewith shall look solely to the Trust Estate for the payment of
any claim or for the performance of any obligation thereunder. The foregoing
shall also apply to any future documents, agreements, understandings, and
arrangements which may relate to this transaction. 8. NO OTHER CHANGES. Except
as expressly modified by this Lease Extension Agreement, all of the terms,
covenants and conditions of the Lease shall remain in full force and effect and
are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
respective hands and seals this 28th day of May, 1997.
NEW PLAN REALTY TRUST
By: /S/JOEL F. CRYSTAL, ASST. SET
NBT BANK N.A.
By: /S/JOE C. MINOR
SVP,CFO & TREASURER
9
<PAGE>
EXHIBIT 10.3
Supplemental Retirement Income Plan
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME PLAN
FOR
CERTAIN MANAGEMENT AND HIGHLY COMPENSATED EMPLOYEES
OF
NBT BANK, NATIONAL ASSOCIATION
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME PLAN
FOR
CERTAIN MANAGEMENT AND HIGHLY COMPENSATED EMPLOYEES
OF
NBT BANK, NATIONAL ASSOCIATION
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 2
ARTICLE II ELIGIBILITY AND PARTICIPATION 3
ARTICLE III SUPPLEMENTAL RETIREMENT BENEFIT 4
ARTICLE IV AMENDMENT AND TERMINATION 5
ARTICLE V CLAIMS PROCEDURE 6
ARTICLE VI MISCELLANEOUS 9
EXHIBIT A
-i-
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME PLAN
FOR
CERTAIN MANAGEMENT AND HIGHLY COMPENSATED EMPLOYEES
OF
NBT BANK, NATIONAL ASSOCIATION
PREAMBLE
NBT Bank, National Association has adopted this Supplemental
Retirement Income Plan for Certain Management and Highly Compensated Employees
of NBT Bank, National Association, effective as of January 1, 1996, to provide
supplemental retirement income to a select group of former management and highly
compensated employees. The Plan is designed to provide retirement benefits that
supplement benefits payable under the NBT Bancorp Inc. Defined Benefit Pension
Plan.
<PAGE>
ARTICLE I
DEFINITIONS
When used herein, the following words shall have the meanings
set forth below, unless the context clearly indicates otherwise:
1.01 "Bank" shall mean NBT Bank, National Association and
any successor.
1.02 "Beneficiary" shall mean the person(s) designated by
a Participant in accordance with paragraph 3.05 to receive benefits (if any)
following the Participant's death.
1.03 "Participant" shall mean an employee or former
employee of the Bank who is selected by the Bank to participate in the Plan, and
who satisfies the eligibility provisions of Article II.
1.04 "Participation Agreement" shall mean the written
agreement between the Bank and a Participant, in the form attached as Exhibit A
of the Plan.
1.05 "Plan" shall mean the Supplemental Retirement Income
Plan for Certain Management and Highly Compensated Employees of NBT Bank,
National Association.
1.06 "Plan Administrator" shall mean the Senior Vice President
of Human Resources of the Bank, or such other person or entity designated by the
President of the Bank to carry out the administration of the Plan.
1.07 "Qualified Plan" shall meant the NBT Bancorp Inc.
Defined Benefit Pension Plan.
-2-
<PAGE>
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 ELIGIBILITY. Each employee or former employee of the Bank
selected by the Bank to participate in the Plan shall become a Participant in
the Plan upon the employee's or former employee's execution of a Participation
Agreement.
2.02 EXCLUSIONS. Notwithstanding anything in this Plan to the
contrary, no individual who is or was a president and/or chief executive officer
of the Bank after 1988 shall be eligible to participate in this Plan.
-3-
<PAGE>
ARTICLE III
SUPPLEMENTAL RETIREMENT BENEFIT
3.01 BENEFIT AMOUNT. Each Participant's benefit under this
Plan shall be an amount equal to the excess (if any) of (a) the amount indicated
on the Participant's Participation Agreement, over (b) the amount payable to the
Participant pursuant to the terms of the Qualified Plan as of the date payments
from the Qualified Plan to the Participant commence. The amount described in (a)
above shall be subject to actuarial adjustment so that the amount in (a) above
reflects payments in the same form, and beginning at the same time, as payments
from the Qualified Plan.
3.02 TIME AND FORM OF PAYMENT. Benefit payments under this
Plan shall commence as of the same date, and shall be payable in the same form,
as benefits are paid to or on behalf of the Participant under the Qualified
Plan.
3.03 BENEFICIARIES. A Participant's Beneficiary under this
Plan shall be deemed to be the same as the Participant's Beneficiary under the
Qualified Plan. Participants shall not be entitled to designate a beneficiary
under this Plan.
-4-
<PAGE>
ARTICLE IV
AMENDMENT AND TERMINATION
4.01 AMENDMENT AND TERMINATION. The Bank intends to maintain
the Plan until all benefit payments are made pursuant to the Plan. However, the
Bank reserves the right to amend or terminate the Plan at any time. Any such
amendment or termination shall be made pursuant to written resolutions of the
Board of Directors of the Bank. Notwithstanding any other provision in the Plan
to the contrary, the Plan shall terminate automatically upon the final payment
of all amounts payable hereunder.
4.02 CORPORATE SUCCESSORS. This Plan shall inure to the
benefit of and be binding upon the successors and assigns of the Bank. The Bank
shall use its reasonable efforts to ensure that any successor to the Bank
adopts, and agrees to be bound by, the Plan.
-5-
<PAGE>
ARTICLE V
CLAIMS PROCEDURE
5.01 WRITTEN REQUEST. Participants seeking benefits under
this Plan must submit a written request for benefits to the Plan Administrator.
Such request shall state:
(a) the Participant's date of birth and current age;
(b) the date and the reason the Participant terminated
employment with the Bank;
(c) the basis(es) upon which the Participant believes
he/she is entitled to Plan benefits; and
(d) the address of the Participant.
5.02 NOTICE OF DENIAL. If a request for benefits is wholly or
partially denied, notice of the denial, prepared in accordance with paragraph
5.03, shall be furnished to the claimant within a reasonable period of time, not
to exceed 90 days, after receipt of the request by the Plan Administrator,
unless special circumstances require an extension of time for processing the
request. If such an extension of time is required, written notice of the
extension shall be furnished to the claimant prior to the termination of the
initial 90-day period. In no event shall such extension exceed a period of 90
days from the end of such initial period. The extension notice shall indicate
the special circumstances requiring an extension of time and the date on which
the Plan Administrator expects to render a decision.
-6-
<PAGE>
5.03 CONTENT OF NOTICE. The Plan Administrator shall provide
every claimant whose request for benefits is denied a written notice setting
forth, in a manner calculated to be understood by the claimant, the following:
(a) a specific reason or reasons for the denial;
(b) specific references to the pertinent Plan provisions
upon which the denial is based;
(c) a description of any additional material or
information necessary for the claimant to perfect the request and an explanation
of why such material or information is necessary; and
(d) an explanation of the Plan's review procedure, as set
forth in paragraphs 5.04 and 5.05.
5.04 REVIEW PROCEDURE. The purpose of the review procedure set
forth in this paragraph and paragraph 5.05 is to provide a procedure by which a
claimant under the Plan may have reasonable opportunity to appeal a denial of a
request for benefits to the Plan Administrator for a full and fair review. To
accomplish that purpose, the claimant (or the claimant's duly authorized
representative) may:
(a) review pertinent Plan documents; and
(b) submit issues and comments in writing.
A claimant (or the claimant's duly authorized representative) shall request a
review by filing a written application for review with the Plan Administrator at
any time within 60 days after receipt by the claimant of written notice of the
denial of the claimant's request for benefits.
5.05 DECISION ON REVIEW. A decision on review of a denied
request for benefits shall be made in the following manner:
(a) The decision on review shall be made by the Plan
Administrator. The Plan Administrator shall make a decision promptly, but not
later than 60 days after receipt of the request for review, unless special
circumstances require an extension of time for processing, in which case a
decision shall be rendered as soon as possible, but not later than 120 days
after receipt of the request for review. If such an extension of time for review
is required, written notice of the extension shall be furnished to the claimant
prior to the commencement of the extension.
(b) The decision on review shall be in writing, shall be
written in a manner calculated to be understood by the claimant, and shall
include specific reasons for the decision and specific references to the
pertinent Plan provisions upon which the decision is based.
-8-
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.01 NO EFFECT ON EMPLOYMENT RIGHTS. Nothing contained in this
Plan shall confer upon any Participant the right to be retained in the service
of the Bank nor limit the right of the Bank to discharge or otherwise deal with
the Participant without regard to the existence of the Plan.
6.02 FUNDING.
(a) The Plan at all times shall be entirely unfunded, and
no provision shall at any time be made with respect to segregating any assets of
the Bank for payment of any benefits hereunder.
(b) No Participant or Beneficiary shall have any interest
in any particular assets of the Bank by reason of the right to receive a benefit
under this Plan, and any such Participant or Beneficiary shall have only the
rights of a general unsecured creditor of the Bank with respect to any rights
under the Plan.
(c) Nothing contained in the Plan shall constitute a
guarantee by the Bank or any entity or person that the assets of the Bank will
be sufficient to pay any benefit hereunder.
6.03 WITHHOLDING. Payments made pursuant to the Plan shall
be reduced by income, FICA or other employee payroll taxes, withholding taxes,
or other similar taxes that the Bank may be required to withhold.
-9-
<PAGE>
6.04 SPENDTHRIFT PROVISION. No benefit payable under this
Plan shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge prior to actual receipt thereof by
the payee. Any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge prior to such receipt shall be void. The Bank shall not be
liable in any manner for or subject to the debts, contracts, liabilities, or
torts of any person entitled to any benefit under this Plan.
6.05 ADMINISTRATION.
(a) The Plan Administrator shall be responsible for the
general operation and administration of the Plan and for carrying out its
provisions. Notwithstanding the foregoing sentence, the Plan Administrator may
delegate to employees of the Bank responsibility for such administrative duties
as the Plan Administrator may deem necessary or appropriate. The Plan
Administrator also may engage such actuaries, accountants, counsel or other
persons to perform such services with respect to the Plan as the Plan
Administrator may deem necessary or appropriate.
(b) The Plan Administrator shall have the authority and
discretion to construe, interpret and apply all the terms and provisions of the
Plan, including any uncertain or disputed terms or provisions of the Plan. All
actions and decisions by the Plan Administrator, including any exercise of the
Plan Administrator's authority and discretion to construe, interpret and apply
uncertain or disputed terms or provisions of the Plan, shall be binding and
conclusive upon each Participant, beneficiary, claimant, and the Bank. All
actions and decisions of the Plan Administrator shall be given deference in all
-10-
<PAGE>
courts of law and no such action or decision shall be overturned or set aside by
any court of law unless found to be arbitrary and capricious, or made in bad
faith.
6.06 DISCLOSURE. Each Participant shall receive a copy of
the Plan.
6.07 GOVERNING LAW. The Plan is established under, and
shall be governed and construed according to, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and regulations promulgated
thereunder. The laws of the State of New York also shall apply to the extent
such laws are not preempted by ERISA.
6.08 CONFIDENTIALITY. Each Participant agrees not to
disclose the existence of this Plan, or any of the terms hereof, to any
individual at any time, unless authorized in writing by the President of the
Bank.
6.09 SEVERABILITY. If one or more provisions of the Plan,
or any part thereof, shall be determined by a court of competent jurisdiction to
be invalid or unenforceable, then the Plan shall be administered as if such
invalid or unenforceable provision had not been contained in the Plan. The
invalidity or unenforceability of any Plan provision, or any part thereof, shall
not affect the validity and enforceability of any other Plan provision or any
part thereof.
The Bank caused the Plan to be executed by a duly authorized
officer to be effective as of January 1, 1996.
Dated:
NBT BANK, NATIONAL ASSOCIATION
By: /S/DARYL R. FORSYTHE
-11-
<PAGE>
EXHIBIT 27.1
Financial Data Schedule for the six months ended
June 30, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NBT BANCORP
INC'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 34,730
<INT-BEARING-DEPOSITS> 1,501
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 437,277
<INVESTMENTS-CARRYING> 31,243
<INVESTMENTS-MARKET> 31,241
<LOANS> 698,213
<ALLOWANCE> 11,085
<TOTAL-ASSETS> 1,238,483
<DEPOSITS> 941,205
<SHORT-TERM> 152,893
<LIABILITIES-OTHER> 10,501
<LONG-TERM> 20,189
0
0
<COMMON> 9,003
<OTHER-SE> 104,692
<TOTAL-LIABILITIES-AND-EQUITY> 1,238,483
<INTEREST-LOAN> 31,142
<INTEREST-INVEST> 14,807
<INTEREST-OTHER> 93
<INTEREST-TOTAL> 46,042
<INTEREST-DEPOSIT> 17,145
<INTEREST-EXPENSE> 20,218
<INTEREST-INCOME-NET> 25,824
<LOAN-LOSSES> 1,715
<SECURITIES-GAINS> 18
<EXPENSE-OTHER> 16,825
<INCOME-PRETAX> 11,575
<INCOME-PRE-EXTRAORDINARY> 7,482
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,482
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
<YIELD-ACTUAL> 4.68
<LOANS-NON> 3,619
<LOANS-PAST> 706
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 37,431
<ALLOWANCE-OPEN> 10,473
<CHARGE-OFFS> 1,498
<RECOVERIES> 395
<ALLOWANCE-CLOSE> 11,085
<ALLOWANCE-DOMESTIC> 7,456
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,629
</TABLE>
